Do You Know How Auto Insurance Rates are Determined?

11/10/2014

While it isn’t a deep, dark secret how auto insurance rates are determined, policyholders often wonder how their premiums got so high. If you happen to be one of those people, knowing some of the factors that help assign the precise amount of money you pay each month for auto insurance may be an important and useful tool, should you be thinking of shopping for new coverage.

One of the main factors that decide how much your insurance will cost you is the type of vehicle you drive. Insurers rate a four-door economy sedan a lesser risk, in general, and, therefore, the cost of insuring such a vehicle will be much lower. The rule of thumb is – people who drive these cars are more mature and safer behind the wheel…and have fewer accidents.

On the other hand, a sports car, by reputation, will take a substantial chunk out of your wallet annually, even if you have a clean driving record. You can expect to pay more because cars are typically rated by insurance companies from low to high when it comes to the cost to keep them insured. And, your sports car is considered to be associated with a major risk factor, no matter who the driver is.

Insurance companies use a number system in order to classify your vehicle into the proper category, according to the risk it poses to be involved in an accident. The more crashes your particular type of vehicle statistically gets into, the higher the premium you can expect to pay. Unfortunately, your insurance company places a great deal of emphasis on this rating system – at your expense.

Your driving record will also have a great deal to do with your auto insurance rates. If you have an excellent driving record, with no accidents or traffic tickets, you’re likely to get a good break on your insurance premiums. But, if your driving history leaves a lot to be desired, loaded with moving violations, including speeding, and a past accident or two, you’re probably paying a great deal more.

Obviously, the longer you’ve driven the state’s roads and highways without being involved in an accident or the recipient of a traffic ticket, the better your insurance rates will be. In addition, you’ll be eligible for discounts, further reducing your premiums as a result of your safe driving record. That’s why; you should constantly do your best to keep yourself accident and ticket free. The reward, in all likelihood, will be the absolute lowest price on your vehicle’s insurance needs.

Another factor is your place of residence. Where you live can influence your premiums as well. Depending on where your city ranks as to the number of accidents per capita, theft risk, and traffic congestion, the greater your chance of paying more for auto insurance. Locations with heavy traffic are statistically prone to have an increased number of accidents. In turn, your insurance company will use this information as a factor to set the cost of your premiums.

Add a teen driver to your policy – and, wham! Inevitably, your auto insurance premiums will blow-up. The high risk attached to a teenager driving your vehicle will, in some cases, double your insurance rates. But, if you can convince your teen to maintain a “B” average in their high school or college classes, some of your pain may be reduced under the “good grades” discount.

Many insurance companies offer discounts to offset the rising cost of auto insurance. So, when shopping for new insurance coverage, you may want to consider these factors before jumping at the first quote. They could end up saving you some money.

Whatever you do – don’t assume that, because you’ve been a loyal customer to your current carrier, you’re getting the best rate on your auto insurance. Why not get a free auto insurance quote today?

Were you aware of the factors that decide your auto insurance rates? Feel free to share your thoughts in the comments section below.

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Do You Know How Auto Insurance Rates are Determined?

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While it isn’t a deep, dark secret how auto insurance rates are determined, policyholders often wonder how their premiums got so high.